In the bidding war to be the No. 1 used-car Web site, Auto-Connect LLC is upping the ante by paying $17 million cash to become the exclusive supplier of used-car listings to America Online Inc.
The two-year deal gives AutoConnect access to America Online Inc.'s 19 million members, including 2 million on its CompuServe system. It also links the AutoConnect Web site (www.autoconnect.com) to America Online's site at www.aol.com.
Chip Perry, CEO of AutoConnect, and Tom Ziemba, a spokesman for America Online, said the $17 million deal is the most an automotive Web site company has spent on a single Internet marketing deal.
AutoConnect will pay America Online half of the $17 million this year and half in 2000, pushing its annual marketing budget well over $10 million.
Said Perry: 'We're one of the largest spenders today in the automotive category.'
Web sites that provide used- and new-car sales listings - including AutoConnect, Cars.com, Autobytel.com, Autoweb.com, AutoVantage, Microsoft CarPoint and Auto Trader Online - are in a multimillion-dollar bidding war for partnerships with popular Web portals like Yahoo! and AltaVista and with Internet providers like America Online, the country's largest provider.
The goal is to use those links to drive consumer traffic to their own sites. For example, CarPoint, AutoConnect and Autoweb.com have deals with Yahoo! to have their branded links prominently displayed on Yahoo!'s automotive Web page. Yahoo! also uses Edmund's Auto Buyer's Guides to provide Web surfers with used-car price quotes.
Cars.com, a listing site that represents more than 140 newspapers, has a multimillion-dollar deal with America Online to provide it with automotive-related content, including news and columns. Mitch Golub, president of Chicago-based Cars.com, said he wants to expand the relationship with America Online but expects the costs of doing business with America Online and others to skyrocket.
Said Golub: 'We did anticipate the cost of (marketing) to increase over the next year or two because of the successful (initial public offerings) of Autobytel.com and Autoweb.com, and companies like AutoConnect who have not had success with their consumer base and are looking for wider distribution.'
The increases will continue until there is a shakeout of Internet automotive Web sites. 'And we do expect a shakeout during the next year or two,' Golub said.
Atlanta-based Manheim Auc-tions Inc., the majority owner of AutoConnect and North America's largest auction chain, launched AutoConnect in 1998 and using its auto dealer connections has put together one of the largest, if not the largest, collections of used-car sales listings on the Internet. AutoConnect claims to have 750,000 active listings and about 31,000 dealers who have posted vehicles on the Web site during the past 30 days.
Competitors like Cars.com and Auto Trader Online say AutoConnect still does not have a big enough consumer base. Perry says just give him a little more time.
Last month, more than 1 million visitors - not including repeat visits from the same person - checked out the AutoConnect site. Perry expects the America Online connection, which will be up and running in June, to increase AutoConnect's unique visitors to more than 2 million a month.
'And the consumer traffic will lead to even more dealer participation,' Perry said. AutoConnect hopes to add 10,000 more dealers and 250,000 more vehicle listings by year end.
Despite the perks, the America Online deal was not for everyone. Auto Trader Online, a division of Trader Publishing Co. in Norfolk, Va., considered an America Online/CompuServe deal for $15 million. However, Auto Trader Online would rather reach consumers through its ads in publications and Web sites owned by its parent company.
Said Kelly Morgan, promotion manager for Auto Trader Online: 'The $15 million price tag which was put on the (America Online) deal when we looked at it didn't make sense, given our business model.'